Rates for home loans crept higher, snapping a three-week stretch of declines, even as bond yields remained subdued.
The 30-year fixed-rate mortgage averaged 4.53% during the July 12 week, up one basis point, mortgage provider Freddie Mac said Thursday. The 15-year fixed-rate mortgage averaged 3.99%, up from 4.02%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.86%, up 12 basis points.
Those rates don’t include fees associated with obtaining mortgage loans.
Mortgage rates track the 10-year U.S. Treasury note TMUBMUSD10Y, -0.03% , which has been under pressure as investors snatch up safe haven assets in the face of an escalating global trade war. Bond yields and prices move in opposite directions.
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That’s helped nudge mortgage rates lower, offering a breather for a strained housing market. So far in 2018, the benchmark 30-year fixed-rate mortgage has averaged 4.42%, up from 3.99% in 2017.
But Ben Graboske, who heads the data and analytics group at real estate data provider Black Knight, is keeping a cautious eye on rates.
“Most people assume affordability relates mostly to house prices,” Graboske told MarketWatch. “When you look at affordability through a price lens, it’s easy to understand why people are surprised that we say affordability is good.”
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As MarketWatch has reported, housing affordability is now at its lowest point in a decade. But before the housing bubble burst, higher rates kept affordability lower than it is now.
Affordability is a function of three factors: house prices, rates, and income, and the biggest wildcard right now is rates, Graboske said. “We’re in a period of great uncertainty around the interest rate and that can have a whopper effect.”
In as little as three to five years, rising rates, increasing home prices, and wages that just can’t keep up could mean the housing market exceeds past affordability thresholds, Graboske thinks.
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